All this anguish comes in pursuit of a modest home in the exurb of San Bernardino County, the epicenter of the Southern California housing crash. Plummeting values here sparked a vicious wave of foreclosures.

But it's precisely because prices fell so far here that Sepe can't buy a house now. In a sharp irony, many would-be homeowners in hard-hit markets can't compete with a flood of all-cash offers from investors, some backed by Wall Street war chests.

So they're missing out on the only upside of the real estate crash: historically low prices and interest rates.

The repeated rejections come despite Sepe's solid qualifications: a stable job as a cell tower technician and a pre-approved home loan. He watches as houses hit the market, then get scooped up within an hour. He offered a battle metaphor to describe his plight.

"I am this little country," he said. "And it's like this huge country is coming and attacking my country, and I can't win."

The Inland Empire has gone from bust to boom with a vigor few could have predicted, mirroring Western regions such as Phoenix and Las Vegas. Surging demand has tightened inventory, driving up median home prices in San Bernardino County by 18.3% and in Riverside County by 25.2% from the last year, according to real estate firm DataQuick.

The median, the point at which half the homes sold for more and half for less, hit $226,000 in Riverside and $177,500 in San Bernardino in January.

That's great for the real estate industry and helps the local economy. It also boosts home equity, or, at least, decreases negative equity for the thousands of Inland Empire residents still mired in underwater mortgages.

But it's bad for many buyers. Now that housing is finally affordable, it's unavailable.

"That's really a missed opportunity for folks who have been playing by the rules, are doing the right thing, and trying to get a toehold into homeownership," said Paul Leonard, California director of the Center for Responsible Lending.

Slammed doors

In the Inland Empire's darkest hour, nearly one of five borrowers was behind on a home loan. Foreclosed properties made up more than two-thirds of sales. Work on half-built subdivisions stopped dead, with as construction jobs drying up and the unemployment rate soaring. Last year the city of San Bernardino declared bankruptcy.

San Bernardino County, as well as two of its largest cities, Ontario and Fontana, stirred a national controversy when it recently considered — then shelved — a plan to use eminent domain to seize and restructure underwater mortgages. In a testament to the lasting effects of the crash, about 40% of borrowers in the region still owe more on their properties than they're worth, according to mortgage tracking firm CoreLogic.

But a turnaround is well underway, thanks in part to deep-pocketed investors snapping up bargains with cash. The housing supply is now so tight that it's common for home shoppers to put in 20 or 30 offers before securing a house, real estate agents say.

Cash purchases hit a record last year in California, with a total of 145,797 condominiums and houses bought without mortgage financing in 2012, or about 32.4% of home purchases, according to DataQuick.

The biggest draw of a cash deal, even over offers from those with prequalified mortgages, is that no property appraisal is needed, letting a buyer and a seller set the value of the home.

In the Inland Empire, cash buyers purchased 38.2% of the homes sold in Riverside County and 38.5% in San Bernardino County last year. In the fourth quarter, cash purchases comprised as much as 65% of all sales in some non-resort ZIP Codes.

That's making it tough on would-be buyers such as Shannon Bridgewater. With a 1-year-old boy and another child on the way, Bridgewater and her husband have been searching for a move-up home in the Yucaipa area.

They figured they could get a bigger house for much less than the $395,000 they paid at the height of the market for their current three-bedroom place. But after two years of searching and more than a dozen offers, they keep coming out on the losing end of bidding wars.

"We never thought we would be offering 60 grand over the asking price of a house right now," Bridgewater said. "That just seems crazy; we are pushing the comfort zone."

Buy, rent and hold

For real estate professionals, the turnaround is like a downpour after years of drought.

"There is optimism here for the first time in eight years," said Paul Herrera, government affairs director for the Inland Valleys Assn. of Realtors. "For the first time since 2005, we are thinking that next year will be better than this year."

Other agents say the influx of investors has sucked some of the fun out of the job.